News Corporation (NWS) Share Trading Recommendation

News Corporation (NWS) have an upgraded 12 month share price target of $37.31 from market analyst Macquarie Research Equities. The price target upgrade comes to reflect the valuation accretive share-exchange transaction (at the current A$ exchange rate of US80c). The analyst have found nine reasons as to why this media company is a long term buy. The suite of drivers for NWS remains considerable, with cable programming on track for 25% growth year-on-year in FY07, considerable valuation upside from the group's internet properties, and ongoing capital management driving additional EPS growth. With these growth numbers, excellent balance sheet, inclusion on the S&P ASX 200 at around 70bp on 15 June (rising to 130bp in March), an internet presence first through MySpace and now the joint venture with NBCUniversal, NWS is still the standout buy for fundamental reasons in the universe of Australian media stocks. Tomorrow, 3 April, News Corporation will hold a shareholder vote on the share exchange transaction with Liberty Media. As a reminder, the proposed share exchange transaction will take the form of a swap of the Liberty shareholding for:

(1)The NWS holding of 38.4% in DirecTV.
(2)Three regional sports networks.
(3)Cash of ~US$587m, subject to a working capital adjustment.

Considering the stock has fallen 7% in recent months, now could be an opportune time to position yourself ahead of what looks to be shaping up as a pretty impressive year for NWS shares.

The exchange is a good deal for both NWS and Liberty shareholders (especially given the positive taxation implications for both companies). For NWS, Liberty is removed on EPS and valuation accretive terms. Most significantly, perhaps, it sets up the company for 34% FY08 EPS growth. The share-exchange transaction is around 9% EPS accretive and adds incrementally to an earnings growth outlook dominated by cable network programming.

In summary, the analyst sees:
(4) DirecTV swapped-out. Positive, as it removes the one-way platform and reduces the share count by 16% via the share-exchange tx with Liberty.
(5) Capital management continues. US$3.4bn authorised stock repurchase delivers a further incremental boost to what was already a strong EPS growth outlook for FY07 and (6) FY08. With NWS net debt at ~US$6bn, the company remains very conservatively geared and the potential for further capital management remains.
(7) Cable business to double over three years. This is driven by uplift subscription rates across the Fox cable platform including FOX News, Fox Entertainment and Fox Sports, as well as the launch of FOX Business News channel, with the launch of the Fox Big TEN channel.
(8) Film remains healthy as DVD sales leverage theatrical success of FY06.
(9) Fox Interactive Media/MySpace. A growing centrepiece (with significant user base growth, valuation upside). By way of illustration, the US$900m Google deal will start contributing in earnest from FY08 onwards (US$50m in FY07, US$250m in FY08, US$300m in FY09, up to FY10, at which point the deal may be extended). Additionally, the News joint venture deal with NBC Universal (a rival TV/movie producer) may be a strategically important move.

News Corporation Limited is listed on the Australian Stock Exchange (ASX) under stock code NWS. In November 2004, The News Corporation Limited underwent a reorganisation and redomiciled in the United States. That company's securities ceased trading under the ASX codes NCP and NCPDP on 3 November 2004 and commenced trading the following day as an American company under the new name News Corporation, Inc. Securities based on those American shares still trade on ASX, as Chess Depository Interests under the codes NWS and NWSLV. For any announcement in relation to the former Australian company (The News Corporation Limited) please use the code NCP. For any subsequent announcement by the American-based News Corporation, Inc. please use the code NWS. You can view their investor website here.NWS was listed on the ASX on 4 November, 2004. News Corporation is a Diversified international media and entertainment company. Rupert Murdoch is the appointed Chairman, Director, Managing Director. Read previous stock recommendation for News Corporation (NWS).Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. Check your charts and good luck with your share trading!